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5 last-minute tax mistakes

April 12, 2012

By Lynnette Khalfani-Cox | Money Rates Columnist

Tax season as a whole can be stressful, but the final days before the tax-filing deadline -- April 17 this year -- can be especially hectic. And that last-minute pressure can lead taxpayers to make preventable mistakes on their tax returns.

If you're rushing to get your taxes to the IRS, be sure you don't make these five mistakes -- some of which can land you in hot water with Uncle Sam.

Mistake #1: Missing the deadline

Eleven percent of taxpayers leave their taxes until the last minute, according to Capital One Bank's 2012 Taxes and Savings Survey. And waiting until the last minute can often mean missing the deadline entirely when unexpected issues arise.

If you can't file your tax return by the deadline, be sure to instead submit IRS Form 4868, which gives you a six-month extension to complete your taxes. This will prevent late-filing penalties from the IRS and give you some breathing room to avoid making other last-minute mistakes.

Mistake #2: Not filing electronically

The IRS says that in 2011 alone, almost 100 million taxpayers filed their taxes online using IRS e-file. But if you haven't used it before and the filing deadline is upon you, you may be tempted to go the familiar paper-and-calculator route.

But e-filing can save you a lot of the hassles of traditional filing. Not only does it help to prevent mistakes (built-in calculators perform auto-checks for you), it also means skipping a trip to the post office. If you earned $57,000 or less in 2011 you can use the Free File brand-name software from IRS.gov to prepare and e-file your taxes for free.

Plus, when you e-file and opt to get your refund via direct deposit, the money can reach your account in as little as 10 days, as opposed to waiting weeks for a refund done with paper forms.

Mistake #3: Making a math blunder

Last year the IRS discovered a whopping 4.2 million math errors on taxpayers' returns. Plus, millions more returns contained incomplete information.

Filing your taxes with time to spare and using tax software, which can help catch errors and omissions as they occur, can help keep your return accurate. Mistake-rates on paper returns run about 20 percent, according to the California Society of Certified Public Accountants, while tax returns filed electronically have an error rate of less than 1 percent.

Still, even if you opt for paper, waiting until the days before the deadline -- and the pressure that comes with them -- is likely to raise your risk of a miscalculation.

Mistake #4: Stressing about an audit

The IRS audited 1.6 million taxpayers in 2011. That might seem like a lot of people, but it was actually a tiny fraction of all U.S. taxpayers.

While the thought of enduring an IRS audit can fill nearly anyone with anxiety, it's important to note that the odds are in your favor. Since 70 percent of all taxpayers have an adjusted gross income of $57,000 or less, your chances of being audited may actually be pretty slim.

According to IRS statistics, in 2011:

1 percent of taxpayers making under $200,000 were audited

3 percent of people making more than $200,000 were audited; and

12 percent of individuals earning $1 million or more were audited

While it's normal to fret over taxes and the IRS, your fear of being audited shouldn't stop you from filing a complete and accurate tax return.

Mistake #5: Failing to file at all

This one may seem obvious, but every year about 5 percent of taxpayers -- an estimated 7 million Americans -- don't file their taxes.

Some won't file because they have no legal requirement to do so, perhaps because their income didn't meet the minimum threshold. But others don't file because they deem the process too time-consuming or complicated, while still others may not want to deal with the IRS.

But regardless of your reasoning, if you fail to file a tax return, the person you're likely to hurt the most is you. Besides the fact that a failure to file could draw severe penalties from the IRS, you may also be leaving a refund on the table.

The IRS is currently holding more than $1 billion in unclaimed refunds for U.S. taxpayers who didn't file federal returns for 2008, half of which are more than $600. But if you're one of those people, you only have until April 17 to file a return and claim your money.

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Advertiser Disclosure: Many of the savings offers appearing on this site are from advertisers from which this website receives compensation for being listed here. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). These offers do not represent all deposit accounts available.